Infosys Q2 Results: AI Up, Guidance Cut
Infosys Q2 results show a sharp sequential rise in AI revenue while the company trims its fiscal-year revenue outlook, a mix that may pressure shares.
KEY TAKEAWAYS
- AI revenue rose 29.0% sequentially and was 10.5% of total sales.
- Fiscal-2027 revenue guidance narrowed to 1.0%-2.0% from 1.5%-3.0%.
- Large-deal bookings totaled $5.2 billion, including one mega deal above $2.0 billion.
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Infosys reported a sharp sequential rise in AI-related revenue in its second quarter ended Sept. 30, 2026, even as it trimmed its fiscal 2027 revenue outlook. The company maintained its operating-margin guidance, citing cautious client spending as a constraint.
Second-Quarter Financials
Infosys said revenue for the quarter was $5.1 billion, up 1.3% year over year on a reported basis and 1.5% in constant currency, with a 1.2% sequential increase. Operating margin held steady at 21.0% for the quarter and the first half of fiscal 2027. Basic earnings per share declined 0.3% year over year to $0.20.
Net income rose 6.2% year over year to ₹7,823 crore. Free cash flow fell 15.7% to $928 million, though free-cash-flow conversion remained strong at 113.3% of net profit. For the six months ended Sept. 30, revenue was $10.2 billion, up 2.1% reported and 1.9% in constant currency, with operating margin steady at 21.0%.
Guidance, AI Revenue Growth and Large Deals
Infosys narrowed its fiscal 2027 constant-currency revenue-growth guidance to 1.0%–2.0% from 1.5%–3.0%, while keeping operating-margin guidance at 20.0%–22.0%. Management cited cautious client spending, uneven technology-spending recovery, delayed decision-making, and pricing competition as factors limiting growth. It highlighted AI services and large-deal execution as key growth drivers.
AI-related revenue accounted for 10.5% of total sales and grew 29.0% sequentially, a significant contributor to the company’s pipeline. Large-deal bookings totaled $5.2 billion for the quarter, with 62.0% classified as net-new business. The company also noted a mega deal exceeding $2 billion.
The contrast between accelerating AI revenue and the lowered revenue outlook raises questions about whether AI momentum and recent large bookings can offset the cautious demand environment described by management.
